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Abstract
Conflict within interorganizational relationships has been demonstrated to impair the mechanisms by which cooperation results in mutually beneficial outcomes for partners. The focus of this research is upon the landmark legal battle that occurred within the Meineke franchise organization in the 1990s—a case that includes a potentially devastating demonstration of manifest conflict encompassing overtly opportunistic behavior, contentious class‐action litigation, and a demoralizing reversal of a half‐billon dollar verdict. In a study spanning a 10‐year period within the Meineke organization, the effects of conflict on franchisee satisfaction and compliance are revealed to be long‐lasting and substantial. Using path analysis and mediation tests, we examine both the immediate and long‐term impacts of manifest conflict on channel partner perceptions. We find that episodes of manifest conflict can, through the increased salience of this conflict, have long‐lasting negative impacts on franchisee satisfaction with the relationship and willingness to comply with franchisor regulations, even when the original conflict was remediated in a manner that yielded highly positive outcomes to the aggrieved parties. As a result, our study provides unique and valuable insights to the understanding of franchises and other forms of interorganizational relationships.
* The authors would like to thank Rupert M. Barkoff of Kilpatrick, Townsend & Stockton LLP for his helpful insights regarding the Meineke legal dispute.
* The authors would like to thank Rupert M. Barkoff of Kilpatrick, Townsend & Stockton LLP for his helpful insights regarding the Meineke legal dispute.
Notes
* The authors would like to thank Rupert M. Barkoff of Kilpatrick, Townsend & Stockton LLP for his helpful insights regarding the Meineke legal dispute.
1 Primarily, the appeals court ruled that the “class” characterization of the Meineke lawsuit was inappropriate, as some plaintiff franchisees in the class had already left the organization whereas others remained. As a result, disparities were perceived to exist among the interests of the plaintiff franchisees within the class, and the appeals court thus reversed the initial judgment based on a decertification of the class (Tager Citation2001).
2 As Cochet and Garg (Citation2008) and Stanworth (Citation1995) note, contract changes are greatly facilitated when franchisors work with franchisee councils or associations.
3 We assessed franchisee perceptions of the new contract from discussions with the MDA and from communications with a small sample of franchisees. The new contract was widely perceived to be significantly more aligned with the interests of the franchisees.
4 As noted in Palmatier, Dant, and Grewal's (Citation2007) exhaustive comparative analysis of dominant theoretical perspectives regarding interorganizational relationships, the vast majority of prior studies have characterized opportunistic behavior as causally antecedent to conflict. In other words, most prior conceptualizations have treated opportunistic behavior as what Pondy (Citation1967) would term latent conflict (as an underlying cause for later manifest conflict). Yet, these perspectives are inconsistent with Pondy's (Citation1967) conceptualization defining manifest conflict as behavior which impedes or thwarts the other party's goal attainment.
5 We do not argue that our measure of “conflict salience” is psychometrically dissimilar from Pondy's construct of “perceived conflict” (as measured in other studies), but we conceptually and operationally develop this as an independent construct in order to preserve consistency with Pondy's nomenclature and notion of sequential stages in the conflict process, and to allow us to measure franchisee perceptions of conflict across different stages in this process. Because Pondy conceptualized perceived conflict as a temporal antecedent to manifest conflict, it would be illogical to expect that manifest conflict could cause perceived conflict. Thus, using perceived conflict to measure the consequences of manifest conflict (or aftermath) is conceptually inappropriate. This distinction among constructs is also important because mere exposure to conflictful behaviors cannot necessarily be assumed to cause a franchisee to experience awareness of conflict, just as the lack of conflictful behaviors cannot be assumed to be associated with the absence of perceptions of conflict (see Appendix-B). Furthermore, perceptions of conflict will have inertial characteristics that result in carryover effects, resulting in potential residual perceptions of conflict despite the resolution of manifest conflict (Anderson and Weitz Citation1992; Kaufmann and Stern Citation1992).
6 Certainly, some crossover effects are likely in this situation as new franchisees learn of the prior period of manifest conflict. For this reason, measured levels of internalized conflict among new franchisees joining in aftermath may exceed those “latent” levels that could be expected in systems never experiencing episodes of manifest conflict.
7 In the language of experimental design, our research can be understood as being a combination of a separate pretest and posttest samples design (Cook and Campbell Citation1979) and a posttest‐only design with nonequivalent samples (Shadish, Cook, and Campbell Citation2002), because it has two different treatments and three comparison/control groups.
8 Pondy (Citation1967) conceptualized conflict as a sequential process that initially begins with “latent” conflict, defined as the underlying conditions setting the stage for the later emergence of perceived, felt, and manifest conflict. In most examinations of intrachannel or relational conflict consistent with an experimental design, it would be desirable to obtain “pretest” measures of latent conflict. In our case, this pretest measurement was not possible.
9 Note that when organizational studies utilize a general or global measure of conflict they do not typically assume Pondy's (Citation1967) notion of a temporal sequence of conflict evolution. That is, when conflict is measured in an interorganizational setting using a general construct of conflict, measures of this conflict are taken without regard to time. For example, Palmatier et al. (Citation2006, p. 138) summarize prior research and define conflict as the “overall level of disagreement between exchange partners.” Similarly, Frazier, Gill, and Kale (Citation1989, p. 60) define conflict as “the degree of tension or frustration in the channel relationship arising from the incompatibility of actual and desired responses.”Anderson and Weitz (Citation1992, p. 22) measure intrachannel conflict using a partner's “perception of the level of conflict.”
10 By segregating franchisees in one of these stages on the basis of when they joined the Meineke system, we are able to form a third group representing a third state (latent conflict) of Pondy's taxonomy.
11 As noted previously, we suggest this no‐manifest‐conflict, no‐aftermath group to be similar (but not identical) to a latent conflict state in the Meineke organizational history.
12 As Campbell and Stanley (Citation1963) note, the pursuit of external validity and internal validity are often at odds with one another. Though a fully controlled laboratory experiment would have increased our opportunities to pursue internal validity, we believe our quasi‐experimental field study provides greater external validity.
13 Since, when sampled in 2007, the G2 group had experienced the earlier period of manifest conflict, was currently experiencing the current residual conflict, and was also operating under the new contract, and because we had no control group that experienced residual conflict without the new contract, we cannot actually decompose the “treatment” effects of G2 into those of only residual conflict and those of only the new contract. As a result, we necessarily allow G2 to represent the combined effect of residual conflict and the new contract. Since the new contract was embraced by franchisees as a highly positive amendment, the mean level of conflict salience identified in G2 (conflict aftermath) likely understates the actual impact of residual conflict due solely to the legacy of manifest conflict.
14 Though our research demonstrates the substantial durability of residual conflict and its pernicious consequences within an interorganizational setting, it is likely that our findings are understated. This is because some franchisees experiencing the highest intensity of conflict (those which were highly dissatisfied or noncompliant) are likely to have abandoned the system in response to the manifest conflict. As a result, some highly disgruntled franchisees were likely omitted from our G1 and G2 sample pools, potentially leading to artificially deflated measures of conflict salience and inflated measures of satisfaction and compliance in these groups due to survivor bias. In other words, our findings, whereas remarkable, likely underestimate the true harm that results from manifest and residual conflict.
15 Ultimately, it is difficult to say how much longer these negative franchisee attitudes may persist within the Meineke organization. As a result, optimism regarding the future of the franchise rests upon the notion that as new franchisees gradually join the system and older ones exit, organizational memory of the conflict episode will diminish, ultimately declining to a low level of latent conflict that is inherent in any organization.
16 Franchisee responses to our open‐ended surveys revealed that franchisees perceived significant unfairness regarding the initial franchisor behavior that came to light in 1993 and also the subsequent reversal of the legal verdict in 1998.
Additional information
Notes on contributors
Robert D. Winsor
Robert D. Winsor is Professor of Marketing at the Department of Marketing and Business Law, College of Business Administration, Loyola Marymount University.
Chris Manolis
Chris Manolis is Professor of Marketing at the Department of Marketing, Williams College of Business, Xavier University.
Patrick J. Kaufmann
Patrick J. Kaufmann is Everett W. Lord Distinguished Faculty Scholar and Professor of Marketing at the Marketing Department, School of Management, Boston University.
Vishal Kashyap
Vishal Kashyap is Associate Professor of Marketing at the Department of Marketing, Williams College of Business, Xavier University.
